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Freemium v2

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Freemium Special Report

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Freemium v2

  1. 1. Download now for free!* Special features may incur additional costs Jenny Liquete Entrep 2013
  2. 2. Free + Premium• a business model where in you give away a core product for free and then generate revenue by selling premium products or add-ons to users• a premium is charged for advanced features, functionality, or virtual goods• Common businesses or products that apply this model are software, media, games or web services
  3. 3. Traditional versus FreemiumBusiness Model
  4. 4. Why use Freemium?• Accessible to the market• Psychology of “Free” (attracts new users)• Great marketing strategy• No marginal cost to digital goods
  5. 5. Disadvantages• Value perception – since the basic package is free, customers might have the impression that it has low value• More freeloaders than paying customers might lead to higher operating cost than the money generated• Offering too many features in the free version might prevent paying customers, while too little might generate very little interest• Needs time to work – customers should be engaged first to the free version before considering jumping to the paid one• Rob Walling (tech entrepreneur) likens Freemium to a Samurai sword. "Unless youre a master at using it, you can cut your arm off"
  6. 6. Criticisms• Entice users to spend money• Lawsuit filed against Apple due to poor authentication when making in-app purchases• Impact on children (some games which targets children cannot be completed without in-app purchases)
  7. 7. Steps to Making Freemium Work1 Limit free offerings to avoid cannibalizing your paid customers.Expect your free-to-paid conversion rate to be less than 5%.2 Promote both free and paid offerings, rather than focus just onacquiring paid users.3 Create an incentive for free users to refer their friends to your serviceor product.4 Clearly distinguish between free and paid plans, so users can seevalue in paying for more.5 Create a natural progression from free-to-paid features, such as theoption to buy extra storage space on a cloud service once a user runsout of free space.• Source: WSJ reporting
  8. 8. Gaining Success in the FreemiumBusiness Model• Be viral – easy to access, easy to share (value of free users)• Offer great free products• Find the right balance between offering impressive features while still making the users want to purchase the premium items• Constantly generate interest (ex. Temple Run)
  9. 9. Examples
  10. 10. Freemium & Entrepreneurship• Freemium is mostly used by digital start-ups due to low marginal costs• Innovative business model• Caters to the needs of its users• Minimal marketing cost• Needs creativity to consistently drive interest in the products
  11. 11. Knowledge-Sharing• Allows us to gain access and knowledge from the free programs• Develops creativity and generates more products
  12. 12. Sources:• www.freemium.org/wp-content/ebook-101.pdf• www.accountingtools.com/freemium-pricing•www.wisegeek.com/what-is-a-freemium.htm